Market report: Monday close

ICI MADE a bad start to the week, dragged 18 1/4p lower to 338 3/4p by two damaging stories. The first centres on a £480m hole in its pension fund, according to reports over the weekend. The second involves its US paintmaking unit Glidden, originally bought from Hanson.

Glidden is the target of a number of lawsuits, including personal injury claims relating to lead paint and the cost of clearing it up at various projects. Companies such as Glidden are normally covered by insurance, leaving insurers to mop up the cost of successful claims. But it emerges that Hanson sold Glidden to ICI without cover.

Speculation is rife that ICI may have to shell out huge amounts to settle claims. All this comes only a few weeks after ICI announced details of a heavily discounted £800m rights issue.

The broader market clawed back an opening fall of 30 points, supported by a flurry of takeover speculation in the utilities sector, to tread water. In thin trading, the FTSE 100 index closed down 28.2 at 5154.3 but, with Wall Street closed today for Presidents' Day, investor enthusiasm was muted.

A rogue trade saw CGNU briefly head the list of biggest fallers, plummeting 77p to 740p. But the tumble was prompted by a single trade in 766 shares at 740p. The insurer quickly regained its composure but still ended 4p off at 813.

Drugs giant AstraZeneca fell 59p to 3481p as broker Credit Suisse First Boston downgraded the shares from buy to hold with a 3600p target price. Rival Glaxo-SmithKline added 4p to 1760p amid claims that it is about to sell its consumer products side.

Lloyds TSB rallied 7p to 741 1/2p in the wake of Friday's worse-than-expected fullyear results. US securities house Goldman Sachs has downgraded its earnings per share forecast by 3% to 56.2p for the current year, followed by a cut of 4% to 62.1p for 2003. Goldman made its move to reflect higher restructuring charges and increased bad debt provisions.

But Schroder Salomon Smith Barney remains bullish and has repeated its market outperform rating while raising its target price by 25p to 825p.

Invensys rose 1 3/4p to 109p ahead of unveiling this week of its restructuring. This is expected to include a number of disposals which could raise between £700m and £1bn. Broker Dresdner Kleinwort Wasserstein expects the moves to reduce debt from £3.3bn to £2bn, but reckons the shares are still overvalued.

Tesco retreated 4 1/4p to 247p. Britain's biggest supermarkets chain says full-year results in April will be broadly in line with forecasts of around £1.2bn against £1bn last year. Innogy climbed 41 1/2p to 251 3/4p after the company confirmed weekend reports that it had received a bid approach from German utilities group RWE, which also owns Thames Water.

Scottish Power, 1 3/4p dearer at 428 3/4p, denied reports it had also made a bid approach. International Power was spurred on by the news, adding 5 1/4p to 186p. Logica failed to glean much support from a broker recommendation, slipping 14p to 505p. Dresdner Kleinwort Wasserstein has moved from add to buy with a 670p target price despite the threat of increased competition in multimedia messaging from the likes of Ericsson and Nokia.

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